Stifel has raised its price target on DigitalOcean Holdings Inc. (DOCN) to $57 from $48 while leaving its rating unchanged at Hold. The move follows a quarter in which the cloud infrastructure company delivered results that outpaced expectations and management updated multi-year targets.
On the top line, revenue came in roughly 200 basis points above consensus. Net dollar retention improved by 200 basis points quarter-over-quarter to 101%. The company also recorded a milestone in organic incremental annual recurring revenue growth, describing the expansion as balanced between AI/machine learning workloads and core cloud demand from larger digital-native enterprises.
Management revised its fiscal 2026 revenue growth outlook upward to 21%, up from a prior range of 18% to 20%. Executives signaled that growth should accelerate through the year, exceeding 25% in the fourth quarter as about 31 megawatts of additional capacity are scheduled to come online during fiscal 2026. For fiscal 2027, the company introduced a 30% growth target. Profitability targets were also updated: management outlined EBITDA margin goals of 37% for fiscal 2026 and 40% for fiscal 2027, and unlevered free cash flow margin targets of 19% for fiscal 2026 and above 20% for fiscal 2027.
Stifel commented that the fiscal 2027 profit objectives appear to reflect a stable operating backdrop, noting they do not assume further capacity additions beyond current plans. The firm emphasized that continued investment will be necessary for DigitalOcean to maintain its stated growth trajectory.
Operational strength was mirrored in the company’s reported quarterly earnings. DigitalOcean posted earnings per share of $0.44, beating the expected $0.38 and representing a 15.79% surprise to analysts' estimates. The upside relative to forecasted EPS was highlighted as notable for investors and could shape subsequent analyst and investor assessments.
Market reaction has been mixed. The share price declined 12% over the past week, underscoring a pattern of high volatility in DOCN trading. Current valuation metrics show the company trading at a price-to-earnings ratio of 23.88 and a price/earnings-to-growth (PEG) ratio of 0.11, which some investors interpret as attractive value when compared with growth. At the same time, a proprietary Fair Value analysis flags the stock as overvalued at present levels and indicates there are 10 additional exclusive tips available to subscribers who follow the coverage.
For investors tracking infrastructure names and AI-related cloud demand, DigitalOcean’s updated guidance and margin targets provide a clearer set of milestones to monitor across fiscal 2026 and 2027. The company’s expansion of capacity and stated mix of AI/ML and core cloud revenue will be key variables in assessing whether the firm can sustain the acceleration in growth it projects.
Bottom line: Stifel’s target increase reflects improved near-term operational outcomes and stronger guidance, but the stock’s recent weakness and mixed valuation signals leave a measure of uncertainty for investors evaluating the name.